Spring plowing fertilizer market: wild horses take off the rope
With the arrival of spring farming season, fertilizer prices across China have seen a sharp increase compared to the same period in 2007. Urea prices have risen by an average of 10% to 15%, while ammonium bicarbonate has jumped by about 30%, and ammonium chloride has surged over 50%. Ammonium sulfate, heavily impacted by rising sulfur prices, has increased by as much as 100%. Similarly, phosphate fertilizers have experienced significant price hikes, with DAP climbing 100% and monoammonium phosphate up by around 90%. Due to high export demand, many products are currently out of stock, some companies have stopped quoting prices, and in certain regions, market value has disappeared entirely.
From a national market perspective, this year is shaping up to be the most expensive for fertilizers, with tight supply conditions persisting. Despite the decreasing number of young and middle-aged rural workers and the shrinking cultivated land area, domestic fertilizer supply remains constrained, and prices continue to soar like wild horses breaking free from their reins. Industry experts point to three main factors behind this situation.
First, rising raw material costs have driven up production expenses, leading to sustained price increases. Global energy shortages have caused the prices of key fertilizer raw materials to rise significantly. In March, coal prices in Shandong and Hebei provinces reached or exceeded 1,000 yuan per ton. At a recent Natural Gas Coordination Conference, 30 fertilizer producers reported that gas supply shortages have pushed up the costs of gasifiers and other inputs, along with rising transportation and material costs. Additionally, sulfur prices—critical for compound fertilizers—have skyrocketed from around $54 per ton at the start of last year to $720–$750 per ton now. This has added over 2,000 yuan per ton to the production cost of diammonium phosphate alone.
In early April, compound fertilizer manufacturers nationwide announced new price hikes. In Guizhou, for example, high-grade compound fertilizers saw a 1,000–1,500 yuan per ton increase compared to last year, while low-grade varieties rose by 400–600 yuan per ton. Meanwhile, wholesale prices remain below factory delivery prices, with some even being higher by over 100 yuan per ton.
Second, high international fertilizer prices and strong export demand have also contributed to domestic price inflation. For instance, in 2007, China exported 5.25 million tons of urea, a 284.27% increase from 2006. The average selling price reached 281.63 USD per ton, up 17.88% from 238.91 USD per ton in 2006.
Third, the severe freezing disaster in southern China at the beginning of the year disrupted power supplies and coal deliveries, causing widespread fertilizer shortages during this year’s spring plowing season. With an estimated annual demand of 2.4 million tons of DAP for spring planting, China needed to save 2 million tons to meet demand. However, heavy exports last year and the impact of the ice storm severely limited DAP supply.
The supply-demand imbalance is particularly acute in northeastern China, where most fertilizer consumption relies on external adjustments. Last year’s large exports have left urea and DAP stocks in most regions below 20% of previous years’ levels. With tight urea and DAP supplies, potash import negotiations remain unresolved. Merchants are holding onto inventory, reluctant to ship, further tightening the supply of spring potash. Additionally, rising sulfur prices have led to a sharp increase in potassium sulfate prices, with quotes exceeding 4,000 yuan per ton.
While compound fertilizer prices are unlikely to drop in the first half of the year due to global and domestic supply constraints, urea prices may ease as local transport improves, the fertilizer season changes, and resources are reallocated. According to recent reports, the government may raise the urea export tariff in May. If implemented, this could help curb the upward trend in urea prices.
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